Under the federal CARES Act, Gov. Bill Lee promises Tennessee will make unemployment benefits available to contract workers and the self-employed.
by jesse fox mayshark • april 8, 2020
detail from the state's unemployment website on april 7, 2020.
For the past decade, economists and business writers have hyped the growth of the so-called “Gig Economy,” in which freelance workers of all kinds flit from job to job, theoretically free to define career paths as they see fit.
Trying to survive the 'Gig Economy' when the gigs all dry up at once.
In the idealized vision of this flexible labor force, everybody has regular gigs to pay the bills, side hustles for spending cash and bedroom start-ups that might turn into the Next Big Thing. But the sudden shutdown of the past month has shown the fragility of that system, as industries that rely heavily on contract workers — from software development to marketing and consulting — have slammed to a halt, suspending projects and canceling orders in the face of global uncertainty.
“A lot of people who are gig workers are not people who necessarily have a ton of savings,” said Chyna Brackeen, owner of the music promotion company Attack Monkey Productions and one of the administrators of the Facebook group Knoxville Gig Workers, created to help people navigate the COVID-19 employment landscape.
On Tuesday, Gov. Bill Lee confirmed that for the first time, while the coronavirus pandemic continues to hold the state’s economy at a standstill, self-employed and contract workers will be eligible for unemployment benefits.
The extraordinary expansion of a safety net program usually available only to workers who have lost a job with a third-party employer was included in the federal Coronavirus Aid, Relief and Economic Security (CARES) Act, passed by Congress and signed into law by President Donald Trump last month.
“Self-employed Tennesseans need this assistance,” Lee said during his daily COVID-19 briefing Tuesday afternoon. “We’re working with the federal government to make sure that they get it.”
‘How Long Can You Hold On?’
The assurance came as a relief to many across the state. For the past week, since the passage of the CARES Act, the state Department of Labor and Workforce Development has been encouraging self-employed and contract workers who have lost income as a result of the pandemic to fill out applications for unemployment assistance.
But the department had also cautioned that it was still awaiting federal word on how exactly the new benefits would be administered. That guidance came Monday in a letter from the U.S. Department of Labor.
Yesterday, during Lee’s briefing, state Labor and Workforce Development Commissioner Jeff McCord said there were still details to work out but his office would get the assistance flowing as quickly as possible.
“We'll have more information in the next few days about exactly when that implementation date will be,” McCord said.
He emphasized that his department was dealing with an unprecedented wave of unemployment applications from all sectors of the economy — about 250,000 new claims during the past three weeks, a timeframe that would typically produce only about 10,000.
For Allyson Virden, the expanded assistance offers the prospect of a lifeline. She and her husband, Chris, are in a lot of ways model entrepreneurs, running two full-time businesses: Mid-Mod Collective, a retro furniture boutique on North Central Street, and Olde Virden’s Tennessee Pepper, a specialty spice company.
Although they are continuing to take orders online, both businesses have been effectively shut down by pandemic restrictions.
“The biggest thing is there’s no end in sight, so how long can you hold on?” Virden said.
She filled out the state’s unemployment form last week, indicating that she was self-employed. She’s awaiting word on her status.
Also waiting is Laura Still, founder of Knoxville Walking Tours, who has been forced to suspend her tourism-driven business.
“The biggest concern I have is that my business might not recover at all,” Still said, “because even when travel restrictions are lifted, people may not have the disposable income for it. I do get locals on my tours as well, but they will be financially stressed too.”
A Spotlight on the Situation
Unemployment insurance was created by President Franklin D. Roosevelt in the 1930s as part of his package of New Deal programs to provide assistance during the Great Depression. It was established as a federal-state partnership and is funded by a tax paid by employers for each worker on their payrolls.
States have great leeway in setting the unemployment tax rate and the maximum amounts and duration of benefits available to unemployed workers. Current weekly benefit levels range from a high of $742 in Massachusetts to $235 in Mississippi. Tennessee is toward the bottom, at $275 a week.
Historically, the benefits have not been available to self-employed or contract workers — those who report their income with a 1099 tax form rather than a W-2 — because they do not pay into the unemployment insurance fund.
But recognizing the massive disruption caused by social distancing requirements, stay-at-home orders and travel restrictions to contain the spread of the novel coronavirus, the CARES Act extends unemployment payments to anyone whose livelihood has been directly affected by the pandemic.
That includes people diagnosed with COVID-19 or caring for those who have been, but under the federal guidance it also encompasses people who are “unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities, and has thereby forced the individual to suspend such activities.”
The CARES Act also significantly boosts weekly payments, providing an extra $600 a week for those who qualify on top of whatever state payment they would normally receive. Those extra payments are to continue for up to four months.
Matthew Harris, a professor of economics at the Boyd Center for Business and Economic Research at the University of Tennessee, said the combined payments could add up to more than many low-wage contract workers were making while employed.
“A lot of people have a lot of reasons to stay out for the full four months,” Harris said, while they’re waiting for the economy to stabilize.
The result could be a short-term labor shortage for some of the icons of the gig economy.
“It’s easy to foresee a case where three months from now, Uber’s still dark,” Harris said. “And that sort of will shine a light on the situation a lot of people are in.”
Daje James is well acquainted with the vicissitudes of gig work. She has been fully self-employed as a designer and marketer for the past 19 months, while also building her career as a singer-songwriter and poet.
This spring was shaping up to be particularly productive. She had landed a $3,000 design contract and a monthly retainer with another client. She was also set to do a series of poetry performances with Knoxville’s One World Circus, which would have paid $800 a month for two months.
“All of that is just sort of washed down the drain,” James said.
She is grateful for the prospect of unemployment benefits until some of the work returns. And as both a designer and musician, she has many friends in the same situation, many of them stalwarts of Knoxville’s creative communities.
“People don’t realize how much of our culture is run off of 1099 workers,” James said.
Brackeen agreed. She noted that Tennessee touts its vibrant music scenes and its burgeoning film and TV production.
“Both of those industries rely on independent contractors and self-employed people,” she said.